Closing a Business Transaction is A Lot Like Riding a Mountain Bike

June 10, 2013, by Robert V. Hawn

As a business and M&A lawyer in San Jose, it is not uncommon for me to burn the midnight oil hammering out a deal for a Silicon Valley client. There is often a need to break from the perpetually connected life to recharge the lithium cells, so to speak. On a recent bike ride in Santa Clara on the local single track, it occurred to me that the life of a deal can be contained in a single mountain bike ride.

A ride starts with the first drop of a pedal. Any deal starts with the first realization that two people or groups can get together and construct a process that will create value for both of them. Whether it is a simple software license, or a complex strategic alliance and funding deal, it is that first pedal that moves everything forward.

Whether you are involved in a transaction deal or a single track mountain bike ride, you need the right tools to make it all work. For a lawyer, it is the years of learning that just begin after you leave law school. The late nights wrestling with creating a structure that will reduce risks and the time spent attending or teaching professional seminars all contribute to the base of knowledge that comes to bear in every transaction. Making sure your tires fit the trail and your derailleur is adjusted and chain oiled can make the difference between a ride and an ordeal.

Both deals and rides can vary in how they start. Sometimes, you are thrown right into the negotiations, having just met the client minutes before, like the ride that starts with a pounding incline over gravel and sharp rock. Other times, there are in depth discussions over goals and approaches, like the trail that starts level and smooth through redwood shade.

Then, there is the slog. I ride in the mountains, and it is very typical for rides to start uphill, and end downhill. Cranking slowly up a ponderous grade is not glamorous, but is critical to getting to your goal. Even a business deal built on insightful strategy needs implementation, and it is the late nights and weekends, slogging through reams of documentation and often mind-numbing minutiae that lead to success. It is sweaty ponderous work, but somebody has got to do it.

The home stretch is where things can get, shall we say, interesting. In mountain biking, the downhill is where skill is required to keep bike and body together. Any mountain biker will tell you about their last "endo," so named because your body has just gone "end over" the handle bars. Road rash and cracked ribs are the usual result. In deals, it is the same. At some point, some new fact or number is looked at just a little bit differently, or a recalcitrant stockholder will not cooperate, or a delayed negotiation on a major issue leads to stalemate, or a lawsuit from left field hits, and you have received the legal equivalent of a body slam. Although the first few minutes may feel like it is the end of the world, most times you pick yourself up, assess the damage, figure out the fix (time to replace the rear derailleur drop out or buy out that difficult stockholder) and continue on your way. In rare circumstances (like you just snapped your collar bone or the Federal Trade Commission will not approve your deal), you lick your wounds and try again another way on another day. But this is rare.

There is an old lyric that goes "... you better watch your speed, trouble ahead trouble behind, don't you know that notion just crossed my mind". All parties to a deal want it done yesterday, and the business case for doing so can be convincing. Going too fast on a mountain bike, however, can lead to the dreaded endo, and a whole other parade of orthopedic and epidermal horribles. In a business deal, it can be worse. The Time Warner AOL acquisition was rumored to have been negotiated and signed under a very compressed time schedule, and is taught in business schools as one of the worst mergers in American history. Go fast, but be deliberate and do it right.

Everyone will tell you that deals are not a sprint. In any ride, you need to make sure your energy stays fueled, or you will "bonk", hit the wall, run out of gas, or hit countless other metaphors that mean you've just come to a full and complete stop. In a transaction, we call it deal fatigue. Bringing up countless new issues as a deal gets closer to close, experiencing unexpected delays, or a thousand other things, can kill a deal as fast as any bonk. The cure: deal with it upfront. Before a ride I slam a peanut butter sandwich (whole grain bread, thank you very much). Before a deal, the more I know about the parties, their business, motivation, experience and interests, and the more I know about getting done the type of deal in which I am involved, the less chance my transaction will bonk.

I could go on, but the last conference call just ended, the next turn of the agreement went out the door, and it is time to go spin the local single track.

The information appearing in this article does not constitute legal advice or opinion. Such advice and opinion are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to the author.